T-Space Collection:
http://hdl.handle.net/1807/9742
Thu, 24 Apr 2014 07:08:01 GMT2014-04-24T07:08:01ZTwo-fund separation in dynamic general equilibrium
http://hdl.handle.net/1807/9746
Title: Two-fund separation in dynamic general equilibrium
Authors: Karl Schmedders; Kellogg School of Management
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/]
This paper examines the two-fund separation paradigm in the context of an infinite-horizon general equilibrium model with dynamically complete markets and heterogeneous consumers with time- and state-separable utility functions. With the exception of the dynamic structure, we maintain the assumptions of the classical static models that exhibit two-fund separation with a riskless security. Agents have equi-cautious HARA utility functions. In addition to a security with state-independent payoffs, agents can trade a collection of assets with dividends following a time-homogeneous Markov process. We make no further assumptions about the distribution of asset dividends, returns, or prices. If the riskless security in the economy is a consol then agents' portfolios exhibit two-fund separation. However, if agents can trade only a one-period bond, this result no longer holds. The underlying intuition is that general equilibrium restrictions lead to interest rate fluctuations that destroy the optimality of two-fund separation in economies with a one-period bond and result in different equilibrium portfolios.Sun, 03 Jun 2007 00:00:00 GMThttp://hdl.handle.net/1807/97462007-06-03T00:00:00ZCan intergenerational equity be operationalized?
http://hdl.handle.net/1807/9745
Title: Can intergenerational equity be operationalized?
Authors: William R. Zame; UCLA
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/]
A long Utilitarian tradition has the ideal of equal regard for all individuals, both those now living and those yet to be born. The literature formalizes this ideal as asking for a preference relation on the space of infinite utility streams that is complete, transitive, invariant to finite permutations, and respects the Pareto ordering; an ethical preference relation, for short. This paper argues that operationalizing this ideal is problematic. Most simply, every ethical preference relation has the property that almost all (in the sense of outer measure) pairs of utility streams are indifferent. Even if we abandon completeness and respect for the Pareto ordering, every irreflexive preference relation that is invariant to finite permutations has the property that almost all pairs of utility streams are incomparable (not strictly ranked). Moreover, no ethical preference relation can be measurable. As a consequence, the existence of an ethical preference relation is independent of the axioms used in almost all of formal economics and all of classical analysis. Finally, even if an ethical preference relation exists, it cannot be "explicitly described." These results have implications for game theory, for macroeconomics, and for economic development.Sun, 03 Jun 2007 00:00:00 GMThttp://hdl.handle.net/1807/97452007-06-03T00:00:00ZIncomplete markets with no Hart points
http://hdl.handle.net/1807/9744
Title: Incomplete markets with no Hart points
Authors: Robert M. Anderson; University of California, Berkeley; Roberto C. Raimondo; University of Melbourne
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/]
We provide a geometric test of whether a general equilibrium incomplete markets (GEI) economy has Hart points---points at which the rank of the securities payoff matrix drops. Condition (H) says that, at each nonterminal node, there is an affine set (of appropriate dimension) that intersects all of a well-specified set of convex polyhedra. If the economy has Hart points, then Condition (H) is satisfied; consequently, if condition (H) fails, the economy has no Hart points. The shapes of the convex polyhedra are determined by the number of physical goods and the dividends of the securities, but are independent of the endowments and preferences of the agents. Condition (H) fails, and thus there are no Hart points, in interesting classes of economies with only short-lived securities, including economies obtained by discretizing an economy with a continuum of states and sufficiently diverse payoffs.Sun, 03 Jun 2007 00:00:00 GMThttp://hdl.handle.net/1807/97442007-06-03T00:00:00ZValuation equilibrium
http://hdl.handle.net/1807/9743
Title: Valuation equilibrium
Authors: Philippe Jehiel; PSE and UCL; Dov Samet; Tel Aviv University
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/]
We introduce a new solution concept for games in extensive form with perfect information, valuation equilibrium, which is based on a partition of each player's moves into similarity classes. A valuation of a player is a real-valued function on the set of her similarity classes. In this equilibrium each player's strategy is optimal in the sense that at each of her nodes, a player chooses a move that belongs to a class with maximum valuation. The valuation of each player is consistent with the strategy profile in the sense that the valuation of a similarity class is the player's expected payoff, given that the path (induced by the strategy profile) intersects the similarity class. The solution concept is applied to decision problems and multi-player extensive form games. It is contrasted with existing solution concepts. The valuation approach is next applied to stopping games, in which non-terminal moves form a single similarity class, and we note that the behaviors obtained echo some biases observed experimentally. Finally, we tentatively suggest a way of endogenizing the similarity partitions in which moves are categorized according to how well they perform relative to the expected equilibrium value, interpreted as the aspiration level.Sun, 03 Jun 2007 00:00:00 GMThttp://hdl.handle.net/1807/97432007-06-03T00:00:00Z